Falling rupee fails to take the shine off diamonds

Falling rupee fails to take the shine off diamonds

The relentless fall of the Indian rupee has not dampened demand for rough diamonds in India, by far the world's largest processor of the stones, the chief executive of miner Petra Diamonds Ltd said in an interview.

The rupee fell to a record low of 60.76 to the dollar recently and is down about 11 per cent since the start of May.

Falling rupee fails to take the shine off diamonds

"We haven't seen any effect ...," said Petra Chief Executive Johan Dippenaar. "Indian companies are still strong buyers, but I don't want to for one moment say 'no' it will certainly have no effect."

Petra Diamonds has been holding an auction in Johannesburg this week, its last of the financial year. "We have not noticed an impact (from the weak rupee) on the number of Indian clients attending," company spokeswoman Cathy Malins said in an email.

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Image: 'Summer Storm', a white gold necklace with four pear-shaped and six round diamonds valued at $750,000, in Antwerp, Belgium.Photographs: Francois Lenoir/Reuters

Falling rupee fails to take the shine off diamonds

Petra Diamonds, whose customers are primarily in India, the United States and China, gets most of its production from five mines that it bought from Anglo American's De Beers unit, the world's biggest diamond producer by value.

India imported 31 million carats of rough diamonds in April-May, up about 26 per cent from the same period in 2012, according to data from the Gems and Jewellery Export Promotion Council, an Indian trade body.

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Image: An emerald and diamond pendant and necklace by Bvlgari priced between $2.5 million to $3.5 million, which was a gift from Richard Burton to Elizabeth Taylor, on display in New York City.Photographs: Mike Segar/Reuters

Falling rupee fails to take the shine off diamonds

India processes more than 90 per cent of the world's diamonds, most of which are exported. Petra Diamonds, which has seven producing mines in South Africa and one in Tanzania, is also sensitive to the movement of the South African rand, which hit a four-year low against the dollar in June.

Falling rupee fails to take the shine off diamonds

Like the rupee, the rand is getting hit by both local economic factors and demand for dollars as the US economy recovers, arousing talk that the US Federal Reserve will soon start to wind down its stimulus programme.

Dippenaar said the weaker rand was good for earnings but would add to costs in the longer run.

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Image: A Bonhams employee poses with the Bvlgari crossover ring set with 3.72 carat fancy vivid blue diamond and 3.93 carat diamond at Bonhams auction house in London.Photographs: Luke MacGregor/Reuters

Falling rupee fails to take the shine off diamonds

"Materials that we use are based on an international price, like explosives and diesel; that's all linked to oil price. (The weak rand) obviously drives up those costs so it's a bit of a double-edged sword," he said.

However, Dippenaar said he was more concerned about markets over-reacting to last week's comments by the Fed, which hinted that it would begin slowing the pace of its bond-buying stimulus later this year.

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Image: A shop assistant shows a bracelet from Brazilian designer Mauricio Monteiro, containing a selection of large pink sapphires, pearls and diamonds, at the Iguatemi mall in Sao Paulo, Brazil.Photographs: Nacho Doce/Reuters

Falling rupee fails to take the shine off diamonds

Diamond prices have languished over the past few years, mainly due to sluggish demand in developed markets. Producers are hoping for sales to pick up as disposable incomes rise in populous nations like China and India.

"We remain confident that in the medium term, and especially in the medium to longer term, our market should remain robust because of the supply to market," Dippenaar said.

Falling rupee fails to take the shine off diamonds

"Effectively no new ore bodies have been found, so it all points to one thing: tight supply to the market." The supply of diamonds in the world remains constrained as no major deposits have been discovered in 20 years despite billions of dollars spent on exploration.

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Image: A diamond Cartier bracelet from 1935 formerly belonging to the Duchess of Windsor is displayed at Sotheby's in London.Photographs: Suzanne Plunkett/Reuters

Falling rupee fails to take the shine off diamonds

Petra Diamonds, which produced 2.2 million carats in fiscal 2012 ended June 30, plans to more than double production to five million carats by fiscal 2019. De Beers produced 27.9 million carats in 2012 and has said it expects about the same this year.

Dippenaar said the company's cash flow would grow significantly by fiscal 2016 as its mines go deeper, giving it access to higher grades.

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Image: A vivid green diamond ring together with a fancy pink diamond ring and a fancy intense blue brilliant-cut diamond ring are displayed at Sotheby's auction house in London.Photographs: Kieran Doherty/Reuters